Call For A Living Pension £17500 A Year

[The Knimbies who say No]

weaker- well done that man. I hold similar views about 'feeding the beast' but don't have your capital reserves.

[crashmonitor]

weaker- well done that man. I hold similar views about 'feeding the beast' but don't have your capital reserves.

Two routes to financial independence .......one involves working hard, the other watching outgoing and not feeding the beast. No prizes for guessing the ''dandier'' route.

[porca misèria]

But surely if there are going to be so many people with no pension or with a small pension then prices for basic things will fall because most of the population will not be able to pay John Lewis prices. It's interesting how quickly paradigms can change. We will see a big growth in budget shops and I think some of the more expensive lifestyle shops/holidays etc will either vanish or have to compete (as we are seeing now with places like Tesco etc). I don't see John Lewis/Habitat/cruises etc doing good business once all the boomers have died off as there will be nobody from the younger generations to pay the kind of prices they currently charge.

On the contrary!

My parents 'upgraded' their shopping to the likes of Waitrose and M&S after retiring. Their pension wasn't so big as to have to pay income tax, yet it made them a lot better-off than when working, paying tax, and supporting a mortgage and family.

[porca misèria]

Two routes to financial independence .......one involves working hard, the other watching outgoing and not feeding the beast. No prizes for guessing the ''dandier'' route.

Methinks most of us need a fair bit of both those routes.

[Errol]

Debts should have been paid off a long time before retirement or pension time.

Edited June 23, 2014 by Errol

[crashmonitor]

Methinks most of us need a fair bit of both those routes.

Well yes, but you can weight your strategy one way or the other to achieve financial independence.

No surprises that smokers or those that find other ways to burn cash might still have to work until their late sixties. What does 40 a day costs these days..........£100 a week? And what would that money be worth invested over a working lifetime.

Edited June 23, 2014 by crashmonitor

[Starla]

You're probably all going to laugh at me, but I am 39 and I consider myself 7/8ths retired.

I own my home outright, and have savings enough to last me probably two decades of comfortable but not luxury life for when my income drops to 0.

I'm reading this blog at the moment.

http://simple-living-in-suffolk.co.uk/

It's basically one persons attempt to retire early and some of the financial lessons learnt along the way. Although called simple living, its not an eco-blog. I think the writer is an HPC'r. Keeping living costs far below income is a common theme.

In my case, I use salary sacrifice to put most 40% tax rate income (50-65% EMTR) into pension. This is enough to clear the mortgage with the lump sum at age 55. The rest of it will turn an existing outbuilding into a residential dwelling for income. I've also designed the house so part of it can also be let as an independent flat if required.

After age 55, working to pay so much tax is pointless so will drop to a 2 day week for another 5 years and then stop completely.

With no mortgage to pay, no 40% tax to pay and some extra income, I will basically have the same net income I have now. I currently live off <45% of gross income. If there was no mortgage, I can easily live off <30% gross.

I can't see how anyone paying today's house prices will ever have enough money to pay off the mortgage and be able to retire. Anyone with a low/normal income is stuffed. Anyone with a high income will be paying to support the low/normal income workers. Anyone with rentable assets and no debt gets to farm them all.

Weaker - I salute you for getting your act together so well. I'm kicking myself at a few bad decisions I've made over the years that took me away from being where you are now.

VMR - I've been following "The Ermine" for quite a few years and reading his blog. He's a great writer, such a good read. It's all about Financial Independance for me, and that's what he preaches. The absolute killer with high house prices is that the money required to just service a place to live, could be better used in the FI fund. He definately had it easier in that respect. Everytime house prices rise, it represents another year with "The Firm". In my case I'm lucky enough to have a good pension in the private sector, so I'm bunging away 20% (35ths) into a DB Pension to exit at 55. Couldn't agree more that any income in line for 40% tax should be diverted into pensions. I should have enough cash at 55 to buy outright and/or change my expectations in terms of area if HPI isn't in check. Either way I'm out and FI with the option, like you, to work a couple of days a week if I choose to. Currently living off 36% of net income, which is roughly what my DB pension will pay anyway. They say it's best to do a trial run, I'm doing a 10 year one.

Edited June 23, 2014 by Starla

[weaker]

Weaker - I salute you for getting your act together so well. I'm kicking myself at a few bad decisions I've made over the years that took me away from being where you are now.

It's not perfect - and I'd certainly like to be more into permaculture than i am.

In honesty, i probably would see a bit of an improvement in lifestyle with an extra 3-4k / year coming in but I am happy, and I don't work for the man.

[19 year mortgage 8itch]

Starla - no kids,

Crashmontior - no kids,

Weaker - no kids?

VMR - kids + Noughties equity

A poster who belongs on this thread, Wish I Could Afford One - no kids?

Is there a trend here I'm missing?

[weaker]

Starla - no kids,

Crashmontior - no kids,

Weaker - no kids?

VMR - kids + Noughties equity

A poster who belongs on this thread, Wish I Could Afford One - no kids?

Is there a trend here I'm missing?

Correct, in my case!

VHEMT all the way.

“May we live long and die out”

[Democorruptcy]

You're probably all going to laugh at me, but I am 39 and I consider myself 7/8ths retired.

I own my home outright, and have savings enough to last me probably two decades of comfortable but not luxury life for when my income drops to 0.

My current income is about 8k/year from two sources and I have a dandy time on it (not retirement funds, i do have a small occupational pension due age 65 [university Superannuation Scheme], and whatever remains of state pension which I have about 17yrs credit for so far.... not hoping for much there!.....)

I do things I've always wanted to pretty much every day, and I learn all the time.

I refuse to "feed the beast" any more, and try to avoid paying taxes as much as i can (legally, of course!)

ETA: I have followed a rule all my life to try not to exploit people, so I don't think I could ever be a BTL LL.

ETA2: I like that suffolk blog from VMR below! - I also believe less is more, and I don't consume much at all.

I stopped working aged 42 in 2003 and refuse to feed the beast. I'm very similar with the pension situation as well, small non contributing personal pension and haven't paid NICs since 2004 but have 28 years paid.

I have cash and could buy a house but haven't decided where and it grates on me that it's doing what THEY want. Now providing for yourself counts against you, e.g. little return on savings that block you from benefits, it makes me want to fight back somehow. If I buy a house it seems like saving, just paying your own benefits on behalf of the governbankment. It makes me want to just spend the lot and let the state provide.

[Democorruptcy]

A living pension will be bank driven to take into account that mortgage terms will be extended and so make sure the governbankment can keep paying mortgages via pensions. Plus it means rather than repossess bankers can use forbearance to extend existing mortgage terms past retirement age for problem debtors.

[olliegog]

jam today is much much better than jam in the future.

I would be much better off with £17.5k a year to live on - but think of the tax (and is it per person in which case a couple would have £35k)

my income totals around £13k gross and I live OK (as do lots of people who live alone and have a similar income)

this is made up of state pension + SERPS (from a long working life), plus a small personal pension plan, a bit of investment income and miserable savings income

I pay tax on all my income

I am not beholden to Govt for benefit top ups and pay day to day expenses in full (except for the 25% reduction in council tax)

I manage as do lots of people in my situation - no mortgage to pay helps - but I am not one of these so-called 'wealthy boomers' swanning off on cruises and running two cars and the rest.

it can be done - even though single pensioners cannot live on half what a pensioner couple gets (there are economies of scale)

[weaker]

I stopped working aged 42 in 2003 and refuse to feed the beast. I'm very similar with the pension situation as well, small non contributing personal pension and haven't paid NICs since 2004 but have 28 years paid.

I have cash and could buy a house but haven't decided where and it grates on me that it's doing what THEY want. Now providing for yourself counts against you, e.g. little return on savings that block you from benefits, it makes me want to fight back somehow. If I buy a house it seems like saving, just paying your own benefits on behalf of the governbankment. It makes me want to just spend the lot and let the state provide.

Good for you , Democorruptcy. I know what you mean about the house. I like to buy stuff when it's cheap (who doesn't!) but there simply has not been an opportunity for about 20 years or so when one could say housing was cheap, and even then (e.g. '96) it wasn't cheap, but perhaps "affordable" for a graduate doing a moderately well paid job (30k) to buy a 2-bed in London.

From my perspective, a house is a special kind of untouchable asset - it's not counted against you for any future means-tested allowance needs and by God, there'd be a revolution if they just started taking people's houses off them! I do think houses are in general terribly overpriced, and I would welcome (even as an owner) a re-balancing of the economy especially in the SE. That 950k house in this thread is just one unbelievable example of how out-of-kilter things are, and it's sad because it's screwing up people's lives. Interest rates need to rise, because speculators have access to all the 0%-interest money, and can amass BTL portfolios which are filled by DSS-tennants (paid for by the tax-payer). It's wrong, and by paying taxes we're funding our own demise. I have to say, I don't think we need that many more houses in the UK (except perhaps the SE), but we need IR's to rise.

BUT there are areas of the UK which are more reasonable if you don't have to commute to a job in the SE; and actually in some places the quality of life e.g. opera, galleries, theatre, infrastructure (I don't have a car - don't need one!) is pretty good too. Now I'm going OT...and off to see a friend with the dog. Good day to you.

[Quicken]

jam today is much much better than jam in the future.

I would be much better off with £17.5k a year to live on - but think of the tax (and is it per person in which case a couple would have £35k)

my income totals around £13k gross and I live OK (as do lots of people who live alone and have a similar income)

this is made up of state pension + SERPS (from a long working life), plus a small personal pension plan, a bit of investment income and miserable savings income

I pay tax on all my income

I am not beholden to Govt for benefit top ups and pay day to day expenses in full (except for the 25% reduction in council tax)

I manage as do lots of people in my situation - no mortgage to pay helps - but I am not one of these so-called 'wealthy boomers' swanning off on cruises and running two cars and the rest.

it can be done - even though single pensioners cannot live on half what a pensioner couple gets (there are economies of scale)

Isn't there a personal allowance of over £10k, covering nearly all your stated income?

[Democorruptcy]

Good for you , Democorruptcy. I know what you mean about the house. I like to buy stuff when it's cheap (who doesn't!) but there simply has not been an opportunity for about 20 years or so when one could say housing was cheap, and even then (e.g. '96) it wasn't cheap, but perhaps "affordable" for a graduate doing a moderately well paid job (30k) to buy a 2-bed in London.

From my perspective, a house is a special kind of untouchable asset - it's not counted against you for any future means-tested allowance needs and by God, there'd be a revolution if they just started taking people's houses off them! I do think houses are in general terribly overpriced, and I would welcome (even as an owner) a re-balancing of the economy especially in the SE. That 950k house in this thread is just one unbelievable example of how out-of-kilter things are, and it's sad because it's screwing up people's lives. Interest rates need to rise, because speculators have access to all the 0%-interest money, and can amass BTL portfolios which are filled by DSS-tennants (paid for by the tax-payer). It's wrong, and by paying taxes we're funding our own demise. I have to say, I don't think we need that many more houses in the UK (except perhaps the SE), but we need IR's to rise.

BUT there are areas of the UK which are more reasonable if you don't have to commute to a job in the SE; and actually in some places the quality of life e.g. opera, galleries, theatre, infrastructure (I don't have a car - don't need one!) is pretty good too. Now I'm going OT...and off to see a friend with the dog. Good day to you.

They have already started taking people's house off them to provide for care fees because so much of the NHS budget went on PFI and wage rises instead of services. Who knows what might happen in the future. There is nothing to say a house might later count as an asset to use in calculations when making claims. They don't have to kick you out of it to do that. The governbankment now have equity in people's houses via the shared equity scheme Help to Buy Bail Banks. There's nothing to stop them taking a share of someone's equity in return for benefits. I think it's a shoo-in by the time I reach retirement age.

Good day to you too.

[alexw]

Well yes, but you can weight your strategy one way or the other to achieve financial independence.

No surprises that smokers or those that find other ways to burn cash might still have to work until their late sixties. What does 40 a day costs these days..........£100 a week? And what would that money be worth invested over a working lifetime.

It doesn't work that way. It would be the paradox of thrift and fallacy of composition in action. If everyone tried to save more it would either simply push asset prices up, cause bubbles, or crash the system as demand collapsed, or some combination of all three (does this sound at all familiar?).

Economies can only absorb so much capital (savings) profitably. More, and you are just pushing on a string.

[Bloo Loo]

It doesn't work that way. It would be the paradox of thrift and fallacy of composition in action. If everyone tried to save more it would either simply push asset prices up, cause bubbles, or crash the system as demand collapsed, or some combination of all three (does this sound at all familiar?).

Economies can only absorb so much capital (savings) profitably. More, and you are just pushing on a string.

so, spend less and asset prices rise, due to lack of demand?>..

[porca misèria]

Economies can only absorb so much capital (savings)

Golly, that's a clumsy attempt to obfuscate. The idea of confusing capital with savings only works because the banks have historically linked the two as a matter of convenience.

Capital is all about investment. Our ancestors invested, so we now enjoy huge benefits like running water on tap as part of today's capital. Each generation should be investing in projects appropriate to its times, to increase both personal and society's capital. We can't all be a Brunel or a Bazalgette, but we should all do our bit in our working lifetimes to earn our bit in retirement. That's what gets broken when society turns to the instant gratification of consumer credit in place of saving, and unproductive HPI in place of investment. Particularly when incentivised by a society that taxes Aesop's ant to pay his grasshopper.

[NewBrit]

For the "average" person on 26k to retire on 17500 per year they need to do the following:

Collect the state pension that is currently £113.10 per week = £5876. The remaining £11624 per year to get us up to £17500 per year needs to be funded by a pension for example. £11624 after tax is roughly £12800 before tax. A pension pot in todays money that pays £12800 per year is around £213k. To build this up with the average wage of £26k, the person needs to save 17% of their salary per year from age 23 to age 67.

This will of course have an effect on after tax pay. Monthly take home pay on a £26k salary, will go down from £1720 to £1425 to fund the pension. With this amount of take home pay you won't be able to save for and buy a house in most of the UK.

[Austin Allegro]

You're probably all going to laugh at me, but I am 39 and I consider myself 7/8ths retired.

I own my home outright, and have savings enough to last me probably two decades of comfortable but not luxury life for when my income drops to 0.

My current income is about 8k/year from two sources and I have a dandy time on it (not retirement funds, i do have a small occupational pension due age 65 [university Superannuation Scheme], and whatever remains of state pension which I have about 17yrs credit for so far.... not hoping for much there!.....)

I do things I've always wanted to pretty much every day, and I learn all the time.

I refuse to "feed the beast" any more, and try to avoid paying taxes as much as i can (legally, of course!)

ETA: I have followed a rule all my life to try not to exploit people, so I don't think I could ever be a BTL LL.

ETA2: I like that suffolk blog from VMR below! - I also believe less is more, and I don't consume much at all.

I'm not laughing. I did something similar at 39 - downsized and moved abroad - and now consider myself semi-retired. 'Refuse to feed the beast' is a very good description of how I feel also. The current system in Britain is just designed to cream off as much of one's money as possible.

[Austin Allegro]

I stopped working aged 42 in 2003 and refuse to feed the beast. I'm very similar with the pension situation as well, small non contributing personal pension and haven't paid NICs since 2004 but have 28 years paid.

I have cash and could buy a house but haven't decided where and it grates on me that it's doing what THEY want. Now providing for yourself counts against you, e.g. little return on savings that block you from benefits, it makes me want to fight back somehow. If I buy a house it seems like saving, just paying your own benefits on behalf of the governbankment. It makes me want to just spend the lot and let the state provide.

One way round the savings limit on benefit claimants is to spend your excess money on low-maintenance assets such as gold, antiques, artworks, jewellery etc.

[Mikhail Liebenstein]

For the "average" person on 26k to retire on 17500 per year they need to do the following:

Collect the state pension that is currently £113.10 per week = £5876. The remaining £11624 per year to get us up to £17500 per year needs to be funded by a pension for example. £11624 after tax is roughly £12800 before tax. A pension pot in todays money that pays £12800 per year is around £213k. To build this up with the average wage of £26k, the person needs to save 17% of their salary per year from age 23 to age 67.

This will of course have an effect on after tax pay. Monthly take home pay on a £26k salary, will go down from £1720 to £1425 to fund the pension. With this amount of take home pay you won't be able to save for and buy a house in most of the UK.

i suspect by the time us GenXers retire interest rates may be somewhat higher than they are now. Rubbish annuities are a direct product of rubbish low interest rates - I seriously think we have these low rates due to the current population profile. Those retiring and living off interest or buying annuities exceed those joining the system, this excess of savings coupled with low investment borrowing demand keeps interest rates low.

I am sure once the boomers have either been forced to buy an annuity or have spent all their capital through draw down that things will change.

[peakbear]

weaker, on 23 Jun 2014 - 10:39 AM, said:

You're probably all going to laugh at me, but I am 39 and I consider myself 7/8ths retired.

I own my home outright, and have savings enough to last me probably two decades of comfortable but not luxury life for when my income drops to 0.

My current income is about 8k/year from two sources and I have a dandy time on it (not retirement funds, i do have a small occupational pension due age 65 [university Superannuation Scheme], and whatever remains of state pension which I have about 17yrs credit for so far.... not hoping for much there!.....)

I do things I've always wanted to pretty much every day, and I learn all the time.

I refuse to "feed the beast" any more, and try to avoid paying taxes as much as i can (legally, of course!)

ETA: I have followed a rule all my life to try not to exploit people, so I don't think I could ever be a BTL LL.

ETA2: I like that suffolk blog from VMR below! - I also believe less is more, and I don't consume much at all.

Totally agree with 'not feed the beast'. How does this living fit in with your social circle and other half. I assume a few beers out with your mates can easily become a cost/benefit decision when you have long term financials to consider. I've traveled a lot over the last 2 decades and you see the same thing with backpackers. Some people will hole up in say Indonesia say for months living on water and hostel films for 30 quid a week which obviously can be extended for many years for very little cost but isn't something that appeals to me.

[ThePiltdownMan]

For retired people there should be absolutely no need to own a car, especially if they get free bus pass.